Correlation Between First Trust and Adams Natural
Can any of the company-specific risk be diversified away by investing in both First Trust and Adams Natural at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and Adams Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Energy and Adams Natural Resources, you can compare the effects of market volatilities on First Trust and Adams Natural and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of Adams Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Adams Natural.
Diversification Opportunities for First Trust and Adams Natural
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Adams is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Energy and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Energy are associated (or correlated) with Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of First Trust i.e., First Trust and Adams Natural go up and down completely randomly.
Pair Corralation between First Trust and Adams Natural
If you would invest 1,564 in First Trust Energy on September 24, 2024 and sell it today you would earn a total of 0.00 from holding First Trust Energy or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 4.76% |
Values | Daily Returns |
First Trust Energy vs. Adams Natural Resources
Performance |
Timeline |
First Trust Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Adams Natural Resources |
First Trust and Adams Natural Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and Adams Natural
The main advantage of trading using opposite First Trust and Adams Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Adams Natural can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Adams Natural will offset losses from the drop in Adams Natural's long position.First Trust vs. Voya Global Equity | First Trust vs. Blackrock Enhanced Capital | First Trust vs. First Trust Intermediate | First Trust vs. Franklin Templeton Limited |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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